#Chapter 2: The Arbitration and Conciliation Act, 1996

Chapter II: Arbitration agreement

Section 7: Arbitration agreement

This section defines what a valid arbitration agreement is and explains the mandatory requirement that it must be in writing.

(1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

Simple Translation: An “arbitration agreement” is a commitment where the parties agree to use arbitration to resolve specific past disagreements or any disagreements that might come up in the future, as long as those disagreements relate to a clear legal relationship between them (whether from a contract or another legal basis).
Practical Example: Two neighbors sign a detailed agreement to share the cost of a boundary wall. They include a clause stating: “Any future disagreements about wall maintenance shall be settled by a sole arbitrator.” This is a valid arbitration agreement based on a contractual legal relationship.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

Simple Translation: The agreement to arbitrate can either be a single paragraph embedded inside a larger contract (a clause) or it can be a separate, standalone document.
Practical Example:
- Clause: A construction contract contains 50 pages of terms, and on page 48, there is a section titled “Dispute Resolution.”
- Separate Agreement: Two companies sign a main contract without an arbitration clause. When a dispute later arises, they sign a new, short document titled “Agreement to Arbitrate” to cover just that existing dispute. Both are valid.

(3) An arbitration agreement shall be in writing.

Simple Translation: For an arbitration agreement to be legally recognized, it must be documented in writing. Verbal agreements to arbitrate are not valid under this Act.
Practical Example: During a phone call, two directors agree to arbitrate their differences. When a dispute arises, one director refuses. Since the agreement was only verbal, the other director cannot legally force the dispute into arbitration because the agreement was not “in writing.”

(4) An arbitration agreement is in writing if it is contained in—

Simple Translation: The requirement that the agreement be “in writing” can be satisfied in several modern ways beyond a traditional signed paper document:

(a) a document signed by the parties;

Simple Translation: The classic method: a single paper contract that everyone signed.
Practical Example: A physical contract for a software development project is printed, and the authorized representatives of both “DevCorp” and “Client Inc.” sign on the last page under the arbitration clause.

(b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or

Simple Translation: The agreement is considered “in writing” if it’s documented through back-and-forth communication, including modern electronic means like email, instant messaging, or online forms, as long as there is a clear record of the agreement being made.
Practical Example: Company A emails Company B, proposing an arbitration clause. Company B replies, “We accept the terms of the arbitration clause as proposed.” This exchange of emails is a valid arbitration agreement in writing.

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

Simple Translation: If Party A sends the Arbitrator a document stating, “We are in arbitration because we have an agreement,” and Party B submits its response (Statement of Defence) without ever denying that the agreement exists, the existence of the arbitration agreement is legally confirmed.
Practical Example: In its first submission, Company A tells the Arbitrator, “The dispute is covered by the arbitration clause in our contract.” Company B files its detailed defense on the facts of the case but never says, “Wait, there is no arbitration agreement.” By failing to object, Company B confirms the agreement’s existence.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

Simple Translation: A contract can incorporate an arbitration agreement from another document (like a set of standard terms or conditions) simply by making a clear written reference to it, as long as the main contract itself is also in writing.
Practical Example: A sales invoice for a machine (the contract) is signed and states: “All terms and conditions, including arbitration, are governed by the Standard Terms of Sale posted on our website, Document ID: S-45.” If those standard terms contain a clear arbitration clause, that clause is legally considered part of the sales invoice.

Section 8: Power to refer parties to arbitration where there is an arbitration agreement

This section deals with what happens when a dispute that should be arbitrated is instead filed as a traditional lawsuit in a court.

(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute… refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.

Simple Translation: If a lawsuit is filed in court over something that the parties had previously agreed to resolve through arbitration, the court must stop the lawsuit and send the parties to arbitration, provided that one of the parties asks for the referral immediately (before giving their main defense in court). The only way the court can refuse the referral is if it is clearly and obviously visible (prima facie) that no legal arbitration agreement exists at all.
Practical Example: Company X sues Company Y in District Court. Company Y, on receiving the summons, immediately files an application with the court citing the arbitration clause in their contract and asking to stop the suit. The court sees the clause and must refer them to arbitration. If Company Y had waited to submit its full defense on the facts of the claim before asking for arbitration, the request would be too late.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof…

Simple Translation: The court will not even consider the request to send the case to arbitration unless the party making the request attaches the original, signed arbitration contract or a proper certified copy of it.

Proviso (Exception) to 8(2):

Simple Translation: If the original or a certified copy of the arbitration agreement is held by the other side (the opposing party in court) and the requesting party can’t access it, the requesting party can submit a regular copy and ask the Court to order the opposing party to produce the original or the certified copy.
Practical Example: Company Y asks the court to refer the dispute to arbitration but only has a photocopy of the contract. They tell the judge, “The original contract is physically held by Company X.” The court can accept the photocopy for now and issue an order demanding that Company X produce the original document in court.

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.

Simple Translation: Even if one party is arguing in court about whether the case should be arbitrated (under sub-section 1), the arbitration process is allowed to start or continue, and the arbitrator can still issue a decision. The court’s pending decision does not automatically pause the arbitration.
Practical Example: Company Y asks the court to refer the matter to arbitration. While the judge is considering this, Company Y goes ahead and starts the arbitration proceedings. Later, if the judge rules in favor of arbitration, the process is already underway and hasn’t been delayed.

Section 9: Interim measures, etc., by Court

This section grants the Court limited, but powerful, rights to intervene before, during, or after the arbitration to protect the parties and the subject matter of the dispute.

9(1) A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court—

Simple Translation: A party can ask a court for urgent, temporary relief (interim measures) at three key times:
1. Before the arbitration officially starts.
2. During the ongoing arbitration hearings.
3. After the arbitrator has issued the final decision, but before that decision is formally enforced as a court decree.

(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or

Simple Translation: To ask the court to appoint a legal guardian for any party involved in the arbitration who is a child or mentally incapable of representing themselves.
Practical Example: A property dispute goes to arbitration, but one of the rightful heirs is a 16-year-old. The other parties apply to the Court to appoint the 16-year-old’s mother as the official guardian to represent the minor’s interests in the arbitration.

(ii) for an interim measure of protection in respect of any of the following matters, namely:—

Simple Translation: To request a temporary order from the court to protect the things related to the dispute:

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

Simple Translation: To get an order to protect or temporarily store the disputed items, or even to sell perishable items.
Practical Example: A dispute is about 1,000 crates of imported fruit. Since the fruit will rot during the arbitration, a party asks the court for an urgent order to allow the fruit to be sold immediately, and the money generated be held by the court until the arbitrator decides who wins.

(b) securing the amount in dispute in the arbitration;

Simple Translation: To ensure that the money being disputed is protected and available if the party wins the case.
Practical Example: Company A is claiming $2 million from Company B. Company A learns that Company B is transferring all its funds out of the country. Company A applies to the Court for an order to freeze (attach) a $2 million bank account belonging to Company B to ensure the money is available if the award is in Company A’s favor.

(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration…

Simple Translation: To get an order to keep, maintain, or examine any disputed property, and to authorize people to enter premises to do so (like taking samples or conducting experiments).
Practical Example: The arbitration concerns a defective machine. One party asks the Court for an order allowing its technical expert (with the Arbitrator’s approval) to enter the other party’s factory to inspect the machine and take necessary photographs and readings.

(d) interim injunction or the appointment of a receiver;

Simple Translation: To get a temporary order from the court that either stops someone from doing something (an injunction) or appoints a neutral manager (a receiver) to manage disputed property or business.
Practical Example: A former partner starts a new company and begins poaching old clients. The first partner applies for an interim injunction to immediately stop the former partner from contacting the old clients until the arbitration is concluded.

(e) such other interim measure of protection as may appear to the Court to be just and convenient.

Simple Translation: For the court to grant any other type of urgent, temporary protection that seems fair and necessary under the circumstances, even if it’s not one of the specific examples listed above.
Practical Example: A unique antique painting (the subject of the dispute) is kept in a vulnerable location. The Court orders it to be moved to a high-security, climate-controlled vault at the expense of both parties, as a measure to preserve the property.

Proviso to 9(1):

Simple Translation: The Court has the exact same authority and power to issue these interim orders as it would if the dispute were a full-fledged lawsuit being heard before it.
Practical Example: If the Court has the power to freeze a bank account in a regular lawsuit, it has the exact same power to freeze the bank account when granting an interim measure for an arbitration.

9(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.

Simple Translation: If you get an urgent protection order from the court before the arbitration has officially started, you have a strict deadline (90 days) to actually start the arbitration process, or ask the court for more time. This prevents people from using the court’s power for protection without ever committing to the actual arbitration.
Practical Example: Company A gets an order to freeze Company B’s bank account on January 1st. Company A must send a formal request to start arbitration (under Section 21) by March 31st (90 days), or the court order may be withdrawn.

9(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.

Simple Translation: After the arbitrator(s) have been formally appointed, the Court should generally not accept any new requests for interim relief under this section. The parties should ask the Arbitrator for relief instead (under Section 17). The Court will only step in after the tribunal is formed if it finds that the relief the Arbitrator can provide (under Section 17) is ineffective or insufficient in some way.
Practical Example: The Arbitrator is in New Delhi and is trying to order a foreign bank to freeze funds overseas. The bank refuses to comply with the Arbitrator’s direct order. The Court may step in because the Arbitrator’s remedy (under Section 17) is not “efficacious” (effective), and the court has greater legal enforcement power.